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It’s Brilliance or Nothing for The Creative Counsel Co-Founders

The Creative Counsel is a wild ride. It’s certainly not for the faint-hearted. And co-founders Gil Oved and Ran Neu-Ner have radically changed one of the oldest and most traditional industries in modern business.

Nadine Todd

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Gil-and-ran-neu-ner

Vital Stats

  • Players: Gil Oved and Ran Neu-Ner
  • Company: The Creative Counsel
  • Group: 8 companies
  • Employees: 1 100 permanent, and 1 000s more on a casual basis for activations
  • How they started: TCC Activations, the founding business, is the biggest below-the-line marketing agency in South Africa
  • What they do: TCC finds ways to help its clients get products into stores and onto shelves, and then get those client brands off shelves and into consumer hearts, minds and homes.
  • Turnover: R700+ million
  • Visit: www.creativecounsel.co.za

If there are two things Ran Neu-Ner and Gil Oved are sure of, it’s that an unrelenting focus on brilliance pays off, and that successful businesses are built on great people.

The problem is that they operate a company driven by excellence, and that comes at a cost: High staff turnover and burnouts.

Related: The Creative Counsel: Ran Neu-Ner and Gil Oved

Their interview style is tough, almost combative, because they know that their industry, and particularly their company, is most people’s ‘not’ cup of tea. But those who do suit the culture find a fit in a R700+ million company that actively promotes personal and business development, will give you as much responsibility as you can take on, and will handsomely reward you.

A fly on the wall of a Creative Counsel job interview would think that co-founders Ran Neu-Ner and Gil Oved don’t want to hire new people. It’s a combative environment. The tension is palpable. Zoom in to the candidate in the hot seat. They’re sweating bullets. They gulp. The questions are flying thick and fast, why, why, why.

No answer is good enough. It’s followed quickly by another why. There’s no time to pull up rehearsed answers. The interviewers are getting to the heart of the candidate – who they are, what they value, and what their work ethic really is.

If the candidate makes it through the interview in one piece, and comes back for more, then maybe, just maybe, they have what it takes to thrive at TCC. But Neu-Ner and Oved aren’t going to make it easy. The word ‘easy’ isn’t in their vocabulary.

Starting with the end in mindGil-Oved-creative-counsel

The Creative Counsel’s exceptional results over the last 15 years have been driven by a relentless focus on six key, non-negotiable pillars, all of which are centred on how well their employees deliver on TCC’s mandate.

Finding the right people is an essential first step to this process, and it starts with the company’s very first engagement with each employee: The interview.

“For years we had issues around high staff turnover. We realised that the problem started in the interview process. We were hiring the wrong people who didn’t suit our culture, and they would quickly burn out, or challenge our expectations. We realised that 80% of the success of a hire is culture. We just needed to find a way to test culture, as most candidates will tell you what they think you want to hear in an interview.

“Natie Kirsh used to recommend going for a drive. He said that if you sit in the passenger seat and just chat, asking any questions that come to mind, the candidate will soon reveal themselves in the simplest ways. You’ll see the person, and you can make a judgement call on whether they suit the requirements of the position and the company.

“For us, we focus on leading questions. For example, you’re driving to an interview and you’re five minutes late. The robot in front of you goes from green, to orange, to red. What do you do? You’ve just missed orange. How they answer this reveals a lot about their personality.

“We also love the questioning method of four-year olds. Whatever the answer to a specific question is, follow it with a ‘why’. At the beginning it’s not even about the answer. Candidates will always arrive at an interview with certain rehearsed answers. If you keep asking why, eventually they have to start giving you completely unrehearsed, unplanned answers, and that’s when you’ll get a real sense of who they are.

“We also believe it’s important to put pressure on the candidate — again, that’s when you see their mettle. We hate the question ‘what’s your worst quality’. The answer is always their best quality disguised as their worst, like ‘I’m a perfectionist’. But if you ask why, they’re suddenly scrambling for an answer.

“We’re known for our tough interviews. In South Africa, we’re too courteous. We take the opposite approach. We love questions they’re not expecting. This business is most people’s ‘not’ cup of tea. We almost try to convince you not to join us. If you come back after that, you’ll handle the pressure, and we can give you the support and environment to really fly.”

Related: Gil Oved’s Lessons Learnt: Be The Grandmaster of Your Game

“Our culture is immersive, all encompassing. We want to be a part of your life. We’re proud of our business and the brands we promote. Our teams need to feel that way too.”

Building teams to win

TCC’s team is built on a simple analogy. There are 11 football players on the field, but hundreds tried out for those positions. Only the best make the cut, but they’re also the 11 that are willing to do anything to win. They’ll bleed for their team. That’s a winning culture, and it’s vital if you want to be the best.

The six pillars give the team a framework to work within and follow.

“All six of these pillars are natural to our personalities (well, five of them are, one’s just smart business). They’re the result of us articulating why we believe we’ve been a success, and then finding a way to instil those traits and beliefs into the organisation as a whole.”

Brilliance or nothingran-neu-ner-creative-counsel

“Don’t accept anything less than brilliant. This isn’t about hard work. It’s about output. We’re a top agency in a difficult field. If you’re a member of our team, you need to play at your best. It’s a demanding statement because there are no degrees or gradients. It’s either brilliant, or it isn’t. 100 or 0.

“There are consequences to this – cause and effect. It comes at a cost: Burning people out and high staff turnover; it’s not natural for people to perform at this level 24/7/365. We understand that, and if you do, you will be supported and rewarded. But if you don’t, you don’t belong here.”

 

Win by a mile

“When we present, clients ask for one concept. We give them three. That’s the way we approach everything. We literally want to leave our competitors so far behind we can’t even see them. We always say that if you’re going to go into a fist fight, take a grenade. We’re also proponents of the virtues of constructive paranoia: Never underestimate what your competitors are doing.

“It’s a sign of the times that we’re the number one agency in South Africa in terms of staff size and EBIT, and yet we’re also an unconventional, non-traditional agency. It shows how things are changing, and how quickly.

“Everything’s moving at an incredibly fast pace: New thing, new thing, new thing, and if you want to stay ahead of the curve, you need to be leading those new things, not following. It’s fatiguing, but so important.

“This is so engrained in us though. We, Ran and Gil, are the two biggest competitors here, and that drives us. We’ve always sat next to each other, competing. We were so busy competing against each other that we left our competitors behind.”

Grow those who grow our business

“Suppliers, partners, staff – we proactively assist and find ways to grow people and their businesses. We’ve never done this according to brief.

“We don’t make our staff climb the corporate ladder just because. If they shine, we bounce them, whether they’re 27 years old or 47 years old. This isn’t about experience – it’s about skill, competency and hunger. If you’re a maverick who wants responsibility, we’ll give it to you.

“In an industry notorious for retrenchments based on contracts being won and lost, we’ve also never retrenched staff – not in 14 years. We’ve fired people, but we’ve never retrenched anyone. We’re a large employer, and we’re proud of that. We create employment, and if you give your heart and soul to the business, you’ve got guaranteed employment.

“This same focus on growth extends to our suppliers as well. We pay very quickly. We don’t generally ask for credit terms. We know that if we get them their cash quickly, it makes a huge difference to their business. Guys know we care about their companies. We love that they’re making profits from us as well. That’s what grows their business. As a result they’re fair to us too – they don’t rip us off. And most importantly, when we really need them, when we have to deliver something quickly, they’ll bend over backwards for us.”

Healthy heated debatecreative-counsel-office

“The rule is simple: You can challenge anyone, at any time, but you must play the ball, not the man. It’s not allowed to get personal. So we can say to each other, what you’ve said is idiotic. But we can’t call each other idiots.

“We really believe in a sense of competition, and healthy, heated debate is part of this. It’s bred into our backgrounds. You respect your parents, but if you disagree with something they’ve said or decreed, that’s where the negotiation begins. You need to find the angle to get your way.

“Both of our offices have one glass wall that faces the rest of the floor. We’ve created an egalitarian workspace that strips down hierarchies. We’re completely open plan, and even though we do have offices (and wish we didn’t), we’ve kept them as transparent as possible. Everyone can see what we’re doing, at all times. But this means everyone can see us fight as well. We always laugh at newbies to the company.

“Within their first week, at some point, one of us will be in the other’s office and we’re shouting at each other. What follows is the invariable wide-eyed question to their manager: Is the business closing down? The reply is always, nope, that’s just Ran and Gil. And so their induction to healthy, heated debate begins.

“We really believe that the more and harder you debate something, the better. You chip the block away from all angles, and you’ll find the best answer and a better result.

“As business partners, we might not always agree with each other, but we’ve always had the same intent: What’s best for the business? Logic will prevail. Yes, we also have egos, but we always know that if logic prevails, the best decisions are made for the good of the business — but we also approach each debate with an attitude of ‘you better really convince me I’m wrong.’

“And this filters down to the whole company, from managers to new employees. Anyone can challenge anyone, as long as it’s not personal and logic prevails.

Related: Advice: 2 Minutes with SA’s Top Entrepreneurs

“We end up with juniors who think they have a right to challenge us – and they do. If Ran tells a junior copywriter his idea is bad, he can (and will) fight for it. On one memorable occasion, a junior copywriter actually came back six times to defend his idea, until he finally won the debate. Logic prevailed and he proved to Ran that he was right. In front of everybody – this didn’t happen quietly behind a closed door.

“This is so engrained in the company and our culture, that negativity and personal attacks are nipped in the bud – and we don’t need to do it, the staff do it. They approach someone who is getting personal and call them out on it. That’s not the way things are done here. When a culture is properly engrained and supported, employees themselves will maintain and defend it.”

Colleagues first; everything and everyone comes after

“This is the only one that didn’t come to us naturally. Clients come first, that’s always been our motto. So much so that in our start-up days Gil was called our ‘doctor on call’. It didn’t matter what he was doing, if his phone rang he’d answer the call and see to the client. Nothing was more important.

“As we grew though, we realised that it wasn’t just the two of us anymore, and you can’t deliver to clients without a happy family. That’s why this pillar is so important.

“If you walk out of a meeting and have two calls, and one’s a client and the other’s a colleague, your first instinct is to call the client first. That’s the wrong response. You don’t know why your colleague is calling. It could be to warn you about something related to the client.

It could be because they have three clients waiting on an answer or input only you can provide. Family must come first.

“It’s also important for everyone on the team to know that their managers, colleagues and us have their back. Once you know that you’re supported, you’re more likely to make key decisions on your feet, and those are generally the decisions that drive the business forward.

“Of course we try not to lose clients, but the reality is that there’s no real client loyalty. It’s the nature of the industry. You’re always pitching for your next campaign, and the client will choose what’s right for them, not for you. But your team should be here to stay, so care about them and look after them.”

Partner with integrity

“Do everything with integrity. Creating demand, finding a spin, convincing people to spend their cash: This isn’t an industry known for integrity. But we know that money comes and goes, but reputation is forever. That should always be your focus, and the rest will look after itself.”

Getting your growth oncreative-counsel-office-lunch-room

It took Neu-Ner and Oved five years to hit their first R100 million in turnover. It’s an impressive number, and yet they believe it should have happened much quicker.

“At the time, we’d been so busy working in the business that we looked up and we’d hit R100 million. If we knew then what we know now though, that point would have been reached much quicker.

“One of the biggest reasons our early growth was slow was because we needed a five year view, but we only had a one year view. We didn’t trust our own growth plans, and as a result we didn’t have proper systems in place, or the guts to hire the right people for the right jobs. We didn’t believe enough in ourselves and our ‘big’ business.

“We started hitting a proper growth curve when we realised this and changed our attitude. Too many entrepreneurs know that they should hire people better and smarter than them, but they’re scared. They don’t want their position as business owner, leader and largest shareholder invalidated.

“The realisation that as the entrepreneur, you’re the one who takes the risk, who recognises the talent and who brings a winning team together completely validates your position. This is when the tipping point occurs, and also when you can start focusing on real growth strategies.”

Another key point that Neu-Ner and Oved highlight is that entrepreneurs have a tendency to believe that their personal touch is all important – if they aren’t involved in everything, the business won’t succeed. They’re also very conservative about costs. “Eventually, if you’re lucky, and you’ve still managed to build a sustainable, growing enterprise, the business will get too big, and you’ll need to let go.

Related: 10 SA Entrepreneurs Who Built Their Businesses From Nothing

For us, if we’d let go sooner, we’d be ahead of the curve. We wasted a lot of time and resources thinking small.”

One of their key examples is the finance department: “We’re two born entrepreneurs – neither of us likes systems and processes. Our sales were always faster than the systems we could implement, which has meant our systems are always playing catch-up. Even though we understand this, we still waited far too long before putting a proper finance department in place.

“In terms of job titles – and this is true of pretty much all job titles – the difference in cost to company between a mediocre employee and the best in the market is about 20%. But the difference in output is 100%. Today we know to just pay the money. A good financial director costs about R250 000 per year more than an okay financial director. But the mistakes that the good FD stops you from making can run in the millions. We know that if we’d had that vision years ago, we would have saved millions.”

Turnover vs profit

There are different levels of growth, and they’re often dependent on your company’s lifecycle.

“First, you’re just trying to stay open and pay your bills. You’ll be fine, but you need to maintain growth, which impacts your personal life and health. The next level, which for us happened in 2011, is putting a management structure in place. If you really want to grow, it’s important for this to be a top-class management team.

“This is an area where we had previously made mistakes. You’re trying to do things on the cheap, which results in two things: One, you have poor or incorrect hires, or two, you end up with ‘compression’ managers, where all managers (including us) are performing multiple roles – your role, and the role below you. No one is working exclusively at their pay level, and that impacts the more strategic growth areas of the business.

“During this first period, you’re concentrating on top line growth. This is important. Revenue gives you the confidence to build your business. It allows you to become a player in the market, to scale and to leverage your suppliers (the bigger you are, the more you purchase, the better you are as a client, the more you can negotiate better rates, and so on).

“But with revenue comes a cost of sales as well. All revenue that comes into the business has certain responsibilities tied to it – supplier invoices, salaries, overheads. This is where the next level of growth comes in.

“Efficiencies are where you save money, and this directly impacts the bottom line and your profits. Revenue and efficiencies are not mutually exclusive, but where you are in your lifecycle will dictate which is more important and requires more focus.

“Get revenue first. Once you’ve started growing though, it’s time to focus on efficiencies and EBIT (earnings before interest and tax). If you ignore that, you’ll never make great profits.

“Our analogy is that revenue is the fuel that drives your car. Without fuel your car won’t move, so it’s important. But once you’re on the highway, you can now start worrying about efficiencies – how far can you travel on one tank, where are your efficiencies, where can you save on fuel costs?

“Revenue is important. But, it’s not about turnover; it’s about leftover. From a turnover perspective, we’ve had good, steady growth since we launched. We reached a point where our turnover could no longer double though, and that’s when we started looking seriously at our earnings. In 2014, our earnings doubled.

Related: Surprising Things 5 Entrepreneurs Do in Their Lunch Breaks

“We’ve invested in systems, in managing the business better, and we’ve become a lean, mean operating machine. We watch our costs, and we look for every little efficiency we can find. The results have been phenomenal, and that’s where real future growth and earnings lie.”

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

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1 Comment

1 Comment

  1. TheTruthHurts

    Oct 8, 2015 at 08:53

    Seems their “marketing” efforts did not stop when they were interviewed for this article.

    The reason for the EXTREMELY high staff turnover is because they treat their staff like absolute cr@p. They also pay their staff very badly.

    All this while they live lives of luxury. It’s no wonder they can each afford to permanently live in a huge suite at the Michaelangelo Towers Hotel.

    Don’t believe the drivel they are spouting about themselves. They are not nice people, and reading between the lines in this article shows it.

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Entrepreneur Profiles

Tim Hogins Started Out As A Security Guard, Today His Has A Turnover Of R150 Million And Has Self-Funded Three Huge Lifestyle Parks

As a poor township kid, Tim Hogins watched kids pile into buses heading to Sun City every weekend, knowing he couldn’t afford to join them. He was a youngster, but he made a promise to himself. One day he would build parks that anyone could visit — especially underprivileged kids like himself.

Nadine Todd

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tim-hogins

Vital Stats

  • Player: Tim Hogins
  • Company: GOG, formerly Green Outdoor Gyms
  • Est: 2012
  • Turnover: R110 million
  • Projected Turnover: R150 million (2018)
  • Visit: gog.co.za

“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that – I want to employ people, develop them, push boundaries and see where we can take this.”

“Poverty can be a good thing, because growing up poor makes you creative, and that’s an incredible power if you know how to use it.”

Seven years ago, Tim Hogins drove out of an office park and pulled onto the side of the road because he was having a panic attack. His car was closing in on him, he couldn’t see and he couldn’t breathe. After months of hard work, it was all over. His dreams were shattered.

Tim isn’t the first entrepreneur to find himself here, and he won’t be the last. What separates him from countless other aspiring business owners is that despite a massive setback, he didn’t back down. He sat in his car, phoned his wife, and told her what had happened. Instead of telling him it was time to move on and find a job, she asked him how they were going to cobble together the money he needed to start again.

And that was the beginning of Green Outdoor Gyms, a vision Tim had been nurturing for almost two years. A business idea that had led to his retrenchment and was almost ripped away from him by his business partners and investors.

But he didn’t quit. He pushed on. And today his business has a projected turnover of R150 million and has self-funded three huge lifestyle parks that Tim hopes will impact the lives of thousands of underprivileged children while providing jobs for hundreds more.

Related: 8 Codes Of Success That Helped Priven Reddy of Kagiso Interactive Media Achieve A Networth Of Over R4 Billion

The in-built art of tenacity

green-outdoor-gyms

To understand Tim, you need to understand where he came from. As a township kid growing up in Randfontein on the West Rand of Johannesburg, Tim always helped his parents to sell stuff. They were traders. His dad had a small café selling burgers and chips, and his mom baked. While other kids in the area piled into buses for Sun City on the weekends, or visited a local bird park, Tim had to work or the family didn’t eat.

“I matriculated in 1996, and even though I had an exemption, tertiary education wasn’t on the cards for me,” he says. “We just couldn’t afford it.” But Tim had a plan. His cousin told him about a free four-week course to become a security guard, and Tim aced it, securing a position at one of the firm’s top industrial sites.

Here’s the first secret to Tim’s success. Instead of seeing a dead-end job, Tim saw an opportunity. If he did his job well, he would progress to a driver, and then a cash-in-transit guard. From there the plan was management. Becoming a security guard wasn’t his fate because he couldn’t get a degree — it was step one to the rest of his life.

“I was raised to be the best version of myself. Everything is what you make of it. In primary school I was head boy, and in high school the head of the SRC. There’s always a way to grow and improve yourself.”

Two years into his career as a security guard, Tim heard about another opportunity  — a free programming course teaching COBOL, a back-end system used by the financial services industry.

“I grew up 500 metres from Stafford Masie, who would go on to become the first head of Google South Africa and is one of our country’s greatest tech entrepreneurs,” says Tim. “I had zero programming experience — I’d never touched a computer — but I knew how valuable these skills were, and here was an opportunity being handed to me.”

It wasn’t quite as easy as Tim imagined. He failed the aptitude test and had to take it again. Once he was on the course, he failed that too — it was a programming course after all, and Tim needed a far more basic introduction to IT. He didn’t give up though. He’d quit his job and needed to make this work while he was still living with his father and didn’t have financial responsibilities, so he begged the course administrator to let him retake the programme. This time he passed, and found a job at a small IT firm.

Once there, Tim built up his IT acumen. Over the course of his IT career Tim worked for Dimension Data, EOH and SITA. In his final three years he applied for an account management position and moved into sales. His goal was to become a business owner, and so he diversified and learnt what he could about business.

He also paid attention to the world around him, looking for a business opportunity or problem he could solve. He dabbled with some ideas, but the one he kept coming back to was outdoor gyms.

“I saw kids in parks doing sit-ups, push-ups, pull-ups on trees, and kept thinking there must be a better way than this for them. I knew that a proper solution would be good for the whole community — giving kids and parents a safe and free environment to play in and focus on their health. I focused on poorer communities, where gym fees weren’t an option, and kids needed safe places to play and keep out of trouble.”

The more Tim unpacked the idea, the more he began to believe in it. And then his employers found out, and made it clear that they did not like Tim’s attention divided between his job and his business idea. Despite this, Tim continued to focus on his entrepreneurial play, and within a few months he’d been retrenched, ostensibly due to a restructuring of the business, yet Tim was the only person let go.

It was October 2010 and Tim had no job, two-months’ salary and he was about to get married. But it was the best thing that could have happened to him. “That retrenchment catapulted me into business. From then on, my full focus became outdoor gyms.”

Winning and losing

gog-water-park

Tim had approached Joburg City Parks who where interested in the idea. He had also met with an engineer and they had begun to design the equipment. There was just one small problem: Money.

“I knocked on doors, approaching anyone who would listen. One investor laughed at me. He said I’d gone from IT to playing with steel — what was wrong with me? A contact at SITA said flat out that she wouldn’t help me. Looking for funding can be incredibly demoralising. I had an idea and a letter of intent from Joburg City Parks, and it still wasn’t enough.”

And then Tim was introduced to a group of investors who wanted to instal kids play areas in municipal parks. Tim had the City Parks connection; they had the funding. They entered into a business partnership and built a prototype together. This was when Tim’s wheels fell off.

“I was invited to a meeting by my three business partners, and when I arrived there were five people in the room — my partners and their two lawyers. We’d entered into the agreement as 50/50 partners, and they wanted us to all be 25% shareholders. I couldn’t agree to that. This was my idea, my connection, my baby.”

By the time Tim left the meeting, he had no funding, no partners and no prototype and he knew City Parks was getting impatient. All he’d done was create competitors — and they had a demo model.

Tim had spent most of 2011 looking for funding and then building the prototype once he found his partners. He wasn’t just back to square one, he was behind where he’d started months ago. Hence the panic attack.

It was a pivotal moment. Give up or push on? Tim chose to push on. That night, Tim and his wife, Rona Hogins, sat down and came up with a plan. They would sell one car and Rona would apply for a bank loan. Together, they managed to come up with R200 000. Tim approached a friend who was interested in a side business and they launched LXI, an importer of screens for media companies. LXI brought in enough to pay the bills while Tim concentrated on getting Green Outdoor Gyms off the ground.

Then luck stepped in. “I drove past a warehouse and saw some play equipment. Instead of driving on, I pulled in and pitched my business idea to the owner.” The owner, Neta Indig, agreed to build Tim’s prototype at cost, in exchange for a long-term partnership. Tim agreed. His R200 000 would be enough to get the business back off the ground. Green Outdoor Gyms was officially launched in February 2012.

Here’s the thing about luck though. Unless you’re open to opportunities, paying attention and willing to step out of your comfort zone, luck alone will get you nowhere. By the time Tim drove into Neta’s parking lot, he’d spoken to countless investors, had doors shut in his face, lost a partnership and his prototype, and was still willing to look for any opportunity that might present itself. Through sheer will and tenacity, he found it.

Related: The 5-Hour Rule Used By Bill Gates, Jack Ma And Elon Musk

Seizing opportunities

gog-exercise

After the first outdoor gym was installed, two things happened. The competition Tim had feared from his old partners didn’t materialise. It was Tim’s first real lesson in the power of passion. He’d doggedly pursued his idea for over two years. His partners, who didn’t share that passion, did nothing with the prototype they’d acquired. Tim was still — at that stage — in blue ocean territory.

The second was how quickly an idea can take off once the foundations are in place. GOG’s turnover was R3 million in its first year, and orders were flooding in from municipalities throughout South Africa.

Tim was invited to present his solution in parliament, and it was included in the National Development Plan. “Everything escalated faster than I could have imagined,” he says.

“The reality is that we’re an obese nation. It’s a real problem. On top of that, 90% of the country can’t afford commercial gym fees. Under the National Development Plan, every community was earmarked for an outdoor gym. Government saw my vision and they bought into it.”

Tim had to tender for each new site, but he had a first-mover advantage. By the time other players entered his space he’d already built up a track record. His team’s turnover times are impressive and the business doesn’t only design and instal the equipment, but can also overhaul a derelict park. The quality of his products ensures that equipment lasts at least eight years with no maintenance, although once an outdoor park is installed, the community takes ownership of it, cleaning it regularly and maintaining the area.

In six short years, GOG has installed over 1 000 outdoor gyms for local municipalities around the country, and there’s still room for growth. There are currently between 5 000 and 10 000 sites available, and while Tim doesn’t believe they will get all of them, the business will continue to expand. “I believe we still have a ten-year run with government-funded outdoor gyms, but this is no longer our core business.”

In fact, GOG has grown and changed considerably since that first outdoor gym was installed in February 2012.

“I’m an opportunist. I pay attention to developments around me and am always on the lookout for where we can add value,” says Tim. As a result, GOG is now developing its own sites and supplying equipment to the industry — across private and public sectors.

“You need to know that competitors are coming,” says Tim. “When we started out we had a niche with outdoor gyms and government, but someone will always want to eat your lunch. If you know that someone’s paying attention to what you’re doing and that everyone needs to diversify, you can stay ahead of your competitors.

“Our business is centred around health, fitness and family, and  this understanding has allowed us to grow into lifestyle spaces that support our core focus.”

As a result, GOG has expanded to the installation of play areas and outdoor gyms for hotels, private and public schools, beach parks and lifestyle estates, including Steyn City.

“We also have a registered landscape company,” says Tim. “We can take vacant land and transform it into a park with grass, trees, water and pathways. We have a Geotech division that does soil testing and environmental studies.”

None of this happened overnight. It takes time to build a reputation, but if you’re focused on four key things, you can build a sustainable business. “You need to diversify your product range, diversify your customer base, nurture relationships and push outbound sales,” says Tim.

Tim has geared the business for scale, which is critical in a production and manufacturing context. “We have always outsourced our manufacturing, first with Neta, and later to a Chinese manufacturer who has become integral to our success.”

Tim’s relationship with Neta was critical in the start-up phase, but after two years the manufacturer decided to focus on his core. “We were too big — it wasn’t a side project anymore, and Neta wanted to remain in construction,” says Tim. “I needed to either find another manufacturing partner, or move into that space myself.”

Tim visited manufacturing facilities in China and sourced samples until he found a plant that could handle GOG’s volumes and quality. “Chinese manufacturers value loyalty and they’ll do whatever you want at the price point you ask. If you want a cheap product, you’ll get it — and the quality to match. Good quality costs more. I have an excellent relationship with our supplier — so good that he flew out to South Africa to see our operations, because he was impressed with the volumes he produces for us.”

It’s this relationship and the capacity available to Tim that has allowed him to take the next step towards his ultimate vision for GOG: Lifestyle parks.

Living the dream

gog-exercise-park

GOG’s first lifestyle park stemmed from Tim’s need for a showroom and his life-long dream to give underprivileged children access to entertainment parks that he couldn’t afford when he was a child.

“We were manufacturing outdoor parks and I started thinking about other ideas in this space that aligned with our vision and niche. I needed a showroom that could showcase everything we can do, from ziplines to climbing walls, swimming pools to spray pools and outdoor gyms. A lifestyle park was the natural answer to everything I wanted to achieve.”

GOG Lifestyle was opened in November 2016 and is situated off the N14 near Lanseria Airport. It’s close to a number of townships, including Diepsloot and Cosmo City. “The revenue model is corporate team building events, family days and launches, which allows us to run specials for kids, the elderly, and CSI projects for schools and churches.”

The next lifestyle park, GOG Gardens, was opened in Soweto in December 2017. Bigger than the first lifestyle park, GOG Gardens caters for picnics, outdoor events and concerts. It’s a multi-purpose venue with seven venues in one, and also focuses on corporates, the general public and events, with CSI projects that support children.

“We have launched some smaller projects, such as GOG Kids at Chameleon Village in Hartbeespoort and a play area in Vilakazi Street, but our next big project is Happy Island, a 36 hectare water park off Beyers Naude Drive in Muldersdrift.”

Happy Island is GOG’s first joint venture with an investment partner, Tim’s Chinese supplier. Unlike the other lifestyle parks, which GOG self-funded from cash reserves, Happy Island is a multi-hundred million rand project with large capex needs. “The idea came to life when the chairman of our manufacturing supplier visited our operations in South Africa. There are no water parks in South Africa similar to those I visited in China. We are doing something completely new and exciting, and we broke ground in April 2017.”

All of GOG’s lifestyle parks have required high capex investments and have not yet reached break-even, unlike the smaller projects that will reach break-even within a few months. “Our projection for the lifestyle parks is three years, and five years for Happy Island,” says Tim.

“My long-term goal is to have ten lifestyle parks across South Africa, one in each region, and that’s what I’m investing in. We want to make a difference, give kids access to these parks and employ people.

“I’m here today because of my childhood experiences, but before I could invest in this dream, I needed to start small and build up my reputation and cash reserves. To achieve my ultimate dream will take a lot of investment, so that’s the focus.

“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that — I want to employ people, develop them, push boundaries and see where we can take this. When someone says something is impossible, I want to know why, and then try anyway. That’s how you achieve great things. That’s how you realise your dreams.”

Related: 6 Lesson Gems From Appanna Ganapathy That Helped Him Launch A High-Growth Start-Up

Next level

In 2016, GOG launched its first lifestyle park, GOG Lifestyle. Since then, two more lifestyle parks have been added, GOG Gardens in Soweto, and GOG  Kids in Chameleon Village in Hartbeespoort. The company’s biggest venture, Happy Island will soon be open to the public as well.

Healthy Living

GOG’s genesis was outdoor gyms, and the company continues to grow from these original roots: Catering to a growing focus on healthier lifestyles, from public parks to beaches, corporates and residential estates.

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Entrepreneur Profiles

How Fever-Tree Is Burning Up The Mixer Market With Their Unique Selling Point

When it comes to targeting the mixer market, Charles Rolls and Tim Warrillow of Fever-Tree, have hit the nail on the metaphorical head. Their unique selling point, drive for quality and passion for innovation has put the business into a prime position to grow their business – with a little help from well-sourced ingredients.

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Vital Stats

  • Company: Fever-Tree
  • Launched: 2005
  • Founders: Charles Rolls and Tim Warrillow
  • Visit: fever-tree.com

What is Fever-Tree’s Unique Selling Point (USP)?

For us, it’s always been about putting the quality back into the mixer category, from the packaging, imagery, even style of serve but nowhere more so than the ingredients themselves. When creating Fever-Tree, the mixer category was dominated by a couple of multinational conglomerates that had become driven by manufacturing efficiency, rather than quality or flavour.

Our meticulous focus on quality resulted in a very different approach to product development – we delved into the history books to find the most authentic and highest quality ingredients we could, then we went out into the field to track them down, spending time with specialist producers and experts to create our products.

There’s no other company going to the lengths we do to source these fantastic ingredients.

Watch the video below on how it all began …

 

Related: 20 South African Side-Hustles You Can Start This Weekend

Since it’s listing on the London Stock Exchange, Fever-Tree has seen an impressive 20x increase in the share price. Can you expand on the some of the challenges that were faced, as well as how you overcame them, when listing Fever-Tree?

The listing was a great opportunity to attract long term investors in the business as well as enabling the Company to reach a wider consumer audience as we discovered lots of our shareholders are also advocates of our products!

What do you wish you had known before starting the business 13 years ago, or what advice can you give to entrepreneurs?

charles-rolls-and-tim-warrillow-fevertree

My advice to any entrepreneur is to do your research, but also listen to your instinct. There were definitely some nay-sayers for us in the early days, and it’s fortunate we did our best not to listen to them.

When it comes to ingredient sourcing and packaging – where do you begin?

Within a couple of months of meeting my co-founder, Charles Rolls, we set off on a pursuit to find the very best ingredients, literally travelling to the ends of the earth.

Our initial research took us to the British library, where we learned that quinine, the core ingredient in tonic water, comes from the bark of the cinchona tree – colloquially referred to as the ‘fever’ tree. In search of the best quinine in the world, I discovered the last remaining plantation in the Eastern Democratic Republic of Congo, one of the most dangerous parts of Africa. So I travelled there to meet with the growers and to this day, this is where our quinine is sourced.

The journey continues to this day, whether it’s our fresh green ginger from Ivory Coast, Cochin ginger from India or closer to home, our lemon from Provenance or hand-picked elderflowers from Gloucestershire.

Similarly for packaging, from the very beginning we would not compromise on quality, using single serve glass packaging to premiumise the mixer category in every way we could.

We see you’ve launched a new ‘Aromatic Tonic Water’ – what is your key to innovating and creating a product?

aromatic-tonic-water

With any product innovation, it is key to listen to your consumers, look at the trends, find out what people are talking about, what they are buying, what they want more of. This is how it all began when creating Fever-Tree. Charles and I had noted, from different ends of the sector, that premium spirits were driving the growth in spirits category. Consumers were increasingly seeking out craft ingredients and flavours in place of commoditised, mass produced products, but this movement towards premiumisation had passed the mixer category by. There was a clear opportunity to put quality, choice and excitement back into a long-forgotten, stagnant category.

The whole company is built on innovation and we are constantly developing new mixers, new flavours, new ideas and in doing so, creating an array of flavours to pair with the myriad of premium spirits out there.

Our unique Aromatic Tonic Water is a great example of this – it is perfect to mix with gin to create the ultimate pink G&T, a hugely popular drink amongst consumers. This tonic water is made using angostura bark from South America and pimento berries from Jamaica to create a sweet, spicy flavour with a wonderful pink hue.

Related: 10 Cheap Businesses You Can Start In South Africa That Offer Uniquely Local Relevance

Where do you see Fever-Tree in 5 years?

What’s so exciting, is that we’ve only scratched the surface! Whilst G&T consumption is still in strong long-term global growth, the spirits category is not just about gin; and the mixer category is not just about tonic. The trends that we identified at the outset are only accelerating. We’ve seen that quality has broad appeal – people are wanting to drink better quality spirits in greater numbers.

Here in South Africa, the same trends that drove the G&T revolution in the United Kingdom are beginning to emerge. There’s a real ‘gin explosion’ in South Africa, with the emergence of an abundance of craft and local gin brands, as well as more established premium brands becoming ever more present. We’re already seeing some great opportunities for co-promotional activity both in retail but also across hotel, bars and restaurants and we believe there is a significant opportunity to increase our footprint and visibility across South Africa, capitalising on this revival of simple, long mixed drinks such as the gin & tonic.

But Gin only accounts for 6% of global premium spirits, presenting a significant opportunity for us with other spirit categories. Dark spirits, for example, accounts for 10 times as much as gin, and we are the first company to develop a full range of mixers specifically designed to address this very notable opportunity.

What is Fever-Tree’s mantra?

Charles and I created Fever-Tree with one simple premise, which still holds true to this day, that if ¾ of your drink is the mixer, use the best.

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Entrepreneur Profiles

Kumaran Padayachee Of Spartan SME Finance Unpacks When You Should Apply For Funding And What Strategies To Have In Place To Secure It

There’s a big difference between funding that will help you grow your business, and trying to plug a self-inflicted cash flow problem. Kumaran Padayachee unpacks the difference, as well as what funders look for and how businesses can build better cash flow bases.

Nadine Todd

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Vital Stats

  • Player: Kumaran Padayachee
  • Company: Spartan SME Finance
  • What they do: Growth finance, bridging finance and specialised asset finance for the SME sector
  • Visit: spartan.co.za

When do most business owners apply for funding? For some it’s because they suddenly — and urgently — need cash. For others, it’s the culmination of a long-term growth strategy that requires additional working capital to invest in new equipment, people, premises or marketing.

The difference can make or break a business. Do you have a strong base to build from, or are you trying to plug a hole in a leaking ship?

Spartan SME Finance is an alternative funder that focuses on the SME market, ranging from businesses with a turnover of R5 million right through to hundreds of millions. The key to alternative funding solutions though, is that they should be accessed to help you grow.

Spartan CEO, Kumaran Padayachee, unpacks the key elements business owners should have in place to build sustainable businesses with healthy cash flows, and how this will place them on a better footing to secure growth funding as well.

1. Know your numbers

A key success factor in all growth businesses is a focus on internal financial management. “As businesses move from start-up phase into a growth phase, considerations around financial management, forecasting and overall strategic decisions require a higher-level resource than a bookkeeper whose role is to do the books,” says Kumaran. “Someone must be responsible for the business’s financial portfolio, whether that’s a senior financial manager or a financial director.”

Kumaran and his team interview hundreds of business owners each year, and this key area is a clear gap for many businesses. “Entrepreneurs come from many diverse backgrounds. A few have accounting or BCom backgrounds, but most are subject matter experts. They have marketing backgrounds or industry-specific skills. They’ve never studied finance and their decision-making isn’t influenced enough by the numbers.

Related: Spartan Technology Rentals: Kumaran Padayachee

For example, we often analyse a business that has applied for finance and discover that their pricing is incorrect and they are actually undercharging for their product or service. There are clear gaps in their strategy and understanding of product/market fit and a lack of access to market. There are also gaps in how gross profits, margins and pricing formulas work. Put this all together and you have a business that is making less profit than it should, which means less cash is coming into the business, resulting in cash flow problems. Additional financing won’t fix the problem — but financial insights will.”

The lesson is simple: Invest in a financial manager or director sooner rather than later. “Having a financial head offers SMEs two clear advantages. First, their financial housekeeping is in order and up-to-date. You can’t apply for finance if you don’t have up-to-date management accounts and realistic forecasts. We often find business owners applying for funding and they need the cash immediately because they haven’t had a clear view of their financials to see what was coming; the problem is that these businesses tend to have poor management accounts, which delays the process because we can’t get a clear view of the business.

“Second, if the business owners had a tight hold on their financials, they could plan for future requirements, or not need financial assistance in the first place. Finance should be for growth — not to plug cash flow problems.”

2. Focus on a healthy working capital cycle

It’s an all-too-familiar scenario: A manufacturing business needs to purchase raw materials and pay their suppliers within 30 days. Meanwhile, it takes 30 days to manufacture the product, they sell it after a further 60 days, and then another 30 days pass before they are paid. It takes 120 days before the manufacturer sees their cash, and yet they need to be able to fund a production cycle and pay their suppliers.

“The key is to recognise your cash flow cycle and through forecasting be able to manage it,” advises Kumaran. “You can approach your suppliers and negotiate 60-day terms. You can negotiate with your debtors to pay earlier. These are the levers of the working capital cycle that need to be managed to minimise your cash crunch.”

From Kumaran’s perspective, a strategic view of working capital is essential if you want to scale, but there are many basic areas that need to be addressed before a business owner can start focusing on strategy.

“For instance we have businesses with a R30 million turnover that approach us for R5 million in finance. These are not small start-ups. They’re established businesses with decent turnovers. And yet they can’t give us up-to-date management accounts. We need debtors, creditors, management accounts and the last set of financials to evaluate a business and whether it can service the loan. Financials aren’t good enough. We live in a volatile world and a lot changes quickly.

“Management accounts and a debtors report shows us who owes you money, but more importantly, how you manage the people who owe you money. We see this more often than we can count: business owners who are owed a lot, and yet they aren’t collecting their cash.

“A company’s debtors age tells us a lot. We can see how you’re exposed, how many people owe you money, how good or bad you are at managing that, and who your bigger customers are. We can see the balance between your debtors and suppliers. Any accounting system today can capture this information, but is it up-to-date and are you reviewing it? Without these figures at your fingertips, you can’t have a firm grip on the health of your organisation. A healthy working capital cycle is the lifeblood of a business. It doesn’t matter how much money you’re owed if you can’t pay your bills.”

3. Realistic forecasting can make or break you

spartan-sme-finance

When you’re in a scale or growth phase, it’s essential that you lift your head beyond simply the survival of the month or month-end. “Many entrepreneurs get stuck in the trenches, working on the day-to-day challenges and requirements of their businesses without looking ahead.

If you want to grow, you need to be focused on the future: How many people do you need to hire to achieve certain goals; how much funding do you need; where are your growth opportunities? Answering any of these questions requires a forecasting ability that takes into account cash flow, sales forecasts, your pipeline and any opportunities to increase revenue and margins.”

A great example of forecasting is a company that Spartan recently assessed.

“This business is a niche wholesale supplier to the confectionery industry. This sounds like an incredibly narrow offering, and yet they did their research and found a machine that can improve their margins by 75% — after paying for the machine. They needed to finance the machine, and they approached us with full financials, including sales forecasts and the improvements that importing the machine would make on their margins. They had also calculated whether or not they could service the loan.”

4. Be able to service the loan

Your cash flow forecast demonstrates past and future cash flow. It shows how you’re managing the business, how you’re managing cash flow and debtors, and the residual cash that’s available to pay a loan.

“If you’re approaching a funder, make sure you have these figures on hand. If you don’t, the funder needs to figure it out, and more importantly, you might not be able to service the loan. Having the numbers on hand impresses the funder instead — you’ve determined your payability and whether the loan makes sense. You’ve reviewed your options and evaluated the best course of action for your business — these are all clear markers of success.”

Related: How Spartan Has Geared Their Business To Help Fund Yours

According to Kumaran, more often than not, growth requires funding. Businesses that ensure they are in a constant state of readiness, whose financials are always up-to-date and who understand their needs are far more likely to access that funding for the right reasons. More importantly, they’re far more likely to access funding they can afford.

5. Use funding for growth

There is a key to growth funding that can be summarised in a sentence: Will this help me make money? If the answer is yes, you’ve ticked the growth-funding box. If you’re not sure, relook your financials and forecasting. If the answer is no, you’re trying to solve a cash flow problem that will not be fixed by taking on more debt funding.

“As a funder, we care about what entrepreneurs want the money for,” says Kumaran. “We look at business models and strategy. We take a view of the entire picture, which gives us insight into whether the funding will be used in a growth context, or to plug a gap created by a strategy, cash flow, sales, marketing, management or access-to-market problem.

“Why does a business need funding? Is it because they’ve given customers 90 days to pay when the industry norm is 30 days? Is it because they have poor debt collection processes in place? Are they asking for money because their cash flow systems are inefficient? Is a big contract not paying you, and now you need funding to cover a delinquent client?

“On the other hand, is there a legitimate need? One of the key areas we look at is contracts. Project and contract-driven businesses have become the norm in today’s economy. A six-month contract with no prospect of additional work shouldn’t be used as a reason for large capex expenditure. A three-year contract, on the other hand, can be justification for finance to purchase additional machines or to hire more people. You now have three years to build up your pipeline while you service the first contract.

“We also evaluate each business’s strategy. A company that competes with cheaper imports and has no discernible value proposition shouldn’t be securing funding to do more of the same at poor margins, particularly in a highly challenged sector. On the other hand, a company in a commoditised sector that needs funding to pursue a new niche where they can improve margins, play in a space with far fewer (if any) competitors and even start exporting to other markets has a good case for securing funding.

“Can you creatively engineer yourself based on your knowledge, sector expertise and skills base? Or are you trying to bridge a self-inflicted cash flow problem? Too many business owners don’t adequately research their markets. Do you understand the market you’re in? Is your product or service unique? Does it allow you to be insulated against competition and charge a higher premium? Remember, healthy profits equal healthy cash flow, which in turn allows you scope for expanding the business.”

6. Grow slow

Where does growth go wrong? Accessing finance doesn’t automatically ensure success. “Growth is like placing a big bet, and the reality is that in most cases, an incremental bet is better,” says Kumaran. “Are you hiring one staff member every six months or 20 in one go? Will you buy one machine every two years or three in one year?

Related: Business & Leadership Lessons from Kumaran of Spartan

If you’re focused on incremental growth, the chances of falling are lower. We’ve seen business owners go big, and then they lose a key contract. The debt burden of that funding they’ve taken to service that growth buries the business, instead of boosting it. We evaluate every assumption business owners make relating to growth, because that’s the last thing we want to see happen.”

A problem Kumaran often encounters is when entrepreneurs use one positive sign as an affirmation for an entire strategy. “Entrepreneurs may get anxious that if they don’t ‘seize the day’, they’ll miss out on a big opportunity. The result is that they do things too quickly and over-expand.

“Ego also plays a role, particularly when it comes to opening multiple offices. Our advice is to watch yourself and your ego when making these expansion decisions. Get feedback from two or three alternative sources, whether that’s from your board of non-executive directors, mentors or a business group. Ask others for red flags. Review your decisions from every angle.

“Big bets should be slow; they should be the result of considered decisions rather than impulsive ones. You won’t always get everything right. You can plan ahead and still need to plug gaps. But at least start from a solid, sustainable base, with a clear strategy in place.”

7. Know when to fund your growth — and what funding to access

When is the right time to apply for growth funding? For starters, when the growth you’re planning can’t be funded organically, or simply through unlocking more cash within the business.

“Retail businesses and restaurants are a good example of this,” says Kumaran. “A retail business’s growth is often dependant on multiple locations or sites. You reach a point where you’re reasonably confident that your brand and business model works, you’ve piloted your first store for a few years and now you’re ready to expand.

To organically build up the cash to fund a second location will take another five or ten years. If the business has the margins to pay for debt funding over the next five years however, you can have two stores operating at the end of that cycle, with both turning a profit.

“Just consider your burn — there will always be a period where you are not making money from the investment. Is it six months, nine months, 12 months? You need adequate cash flow to support the debt and the burn.

“Go back to your strategy. It’s not just about your market, margins, product, uniqueness and so on. We’ve found that a lot of businesses are poor in their sales and marketing strategies. They want to grow — they have a plan and have pinpointed where to invest — but they can’t fill their sales pipelines. If you aren’t bringing in sales to support your growth investment, you’ll just increase your burn.

“In this economy, rather operate under capacity than over capacity. You’ll never be able to match supply and demand perfectly, no business can. No business can afford redundancies though. When you’re considering your growth options, focus on what you absolutely need to push the needle, and make do with what you can as you build up your pipeline.

“In every case ask the question: Do the costs involved make sense? Will this help drive growth? How? Once you’ve ticked those boxes, consider all your funding options. There are a lot of solutions available to you, from bank funding, which is the cheapest to access but requires a lot of collateral, to private equity funding, which involves giving away equity in the business.

“Alternative funders play in the middle of these two traditional options. Alternative funders tend to be niche and specific, focusing on specific sectors or industries. They carry more risk and don’t require collateral, which is why they’re more expensive than banks, but they bring industry and sector-specific insights as well — and it’s debt funding, which means you aren’t giving away equity in your business.

Their processes tend to be efficient as well, largely due to the niche nature of the funder. When you’re ready to grow, find a funder that matches your needs and understands your business.”

Related: The Ultimate Guide To New Business Funding

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